National resale figures for June from the Canadian Real Estate Association indicate sales fell a seasonally-adjusted 6.7% from May, the steepest decline in seven years.
Last month, while the actual benchmark price of a home in the Greater Toronto Area surged 25.3 per cent year-over-year to $810,700, this still represents a slowdown in price growth compared to record levels seen a year ago.
With sales down and months of supply slowly growing in the Greater Golden Horseshoe, BMO economists Douglas Porter and Robert Kavcic argue that Ontario's new policy did indeed cool the market.
The number of homes sold via Canadian MLS® Systems fell 6.7% in June 2017, the largest monthly decline since June 2010, the Canadian Real Estate Association said Monday.
New listings, meanwhile, were down 1.5% in June - due in large part to pullbacks in the Greater Toronto Area. However, the region's months of inventory is on the rise, sitting at 2.5 months in June. The MLS home price index was 15.8% higher on a y/y basis, while the national average price was only 0.4% higher on the same basis.
"The recent increase in interest rates could reinforce a lack of urgency to purchase or, alternatively, move some buyers off the sidelines before their pre-approved mortgage rate expires", he added.
Some economists said worries over exuberance in pockets of the Canadian housing market - most notably Toronto and Vancouver - reinforced the Bank of Canada's appetite to raise rates amid improving economic data.
But some experts believe that home prices in Canada will keep rising, despite the interest rate hike.
With sales having also declined in April and May, activity in June came in 14.1 per cent below the record set in March.
After being in the high 60 per cent range three months ago, the national sales-to-new listings ratio moved towards balanced market territory last month at 52.8 per cent.